During The Great Depression, California legislators made the decision that losing your house was enough punishment.  They did not want lenders nagging borrowers for the difference in what the former owner owed and what the house was worth, an amount called the deficiency.  Thus, in California there can be no deficiency judgment on purchase money loans dating back to the 1930’s.

As the market heated up in the mid 2000’s, homeowners used their homes as pig banks for vacations, college tuition, cars, boats, and just about anything you can imagine.  Many of the homeowners ended up struggling after the crash and are losing their homes to foreclosure and are facing deficient judgments.  If a homeowner refinanced to get a lower interest rate or to get cash out, the loan is no longer a purchase money loan and is subject to a deficient judgment.

A new bill introduced by the real estate lobby has passed the California Senate which would give some relief to foreclosed homeowners.  The Senate bill will not allow a deficiency on a refinanced loan up to the amount that was paid for house, a substantial change from the current law.  For instance, if a homeowner refinanced a home which was purchased for $500,000 and the new loan was for $600,000, the deficiency judgment could only be applied to the $100,000.  If that $100,000 was used to make improvements to the house, the amount spent on the home improvements would also be exempt from a deficiency judgment.

Much lobbying by real estate agents and Banking groups have changed the original bill which now must pass the California legislator.  Expect more lobbying, for instance bankers do not want the bill to be retroactive as passed by the Senate.  Bankers want the new law to apply to only new loans.

The argument from real estate agents say those who lost their houses should not be burdened by debt so they can move on and hopefully buy consumer goods and homes in the future.  Bankers on the other hand, believe borrowers should be liable for what they owe.

In reality, according to The New York Times, this is a fight over something that is not happening, at least yet.  Lenders in California rarely chase foreclosed borrowers for deficiency judgments.  Pursuing such cases is an arduous process and few of those in foreclosure have assets or income to make it worthwhile.

  The California Senate will take this bill to a committee the week of June 28.

Some more significant changes are in the works this summer concerning FHA loans.  Currently FHA allows seller’s concessions to the buyer of 6% of the selling price, but not for long.  A rule change expected this summer will allow a 3% seller’s concessions.  The logic to this change seems simple.  If the buyer is putting down the minimum down payment of 3.5% and they receive a 6% seller’s concession, the FHA is considering the buyer to be under water from the first day of ownership.  The FHA also believes the 6% incentive encourages inflated appraisals to cover the cost of the concessions.

Whatever you may think of the existing seller concession rules, the fact remains:  Concessions of 6% will be allowed until the FHA announces otherwise. Buyers and sellers who need the 6% concessions  to conclude a transaction need to know the time is ticking, thus creating a motive to purchase now especially  to a  buyer or a seller entertaining offers with  a minimum 3.5% FHA loan.

  Please give me a call at 760-831-5996 if you are contemplating using FHA for a purchase for a sale.  I know FHA.

If you are thinking about or are applying for a home mortgage here is some very important news. Beginning June 1, 2010 lenders’ are more than likely going to order a full credit report immediately before closing.

Be careful not to start shopping early for furniture and for appliances for your new home. Do not use more credit than is normal during your loan process. Do not accept new lines of credit nor apply for new lines of credit.  Your loan could be put on pending while researching any changes, and in fact could be denied at the last minute if your debt-to-income ratio should change.

These changes are part of an effort by mortgage giant Fannie Mae to cut down on poor underwriting by lenders and frauds by borrower.

Fannie’s loan qualification initiative will require lenders not only to pull two credit reports for each mortgage transaction but also to verify borrower occupancy plans for the property, Social Security numbers and taxpayer ID numbers, among other changes.

  How to deal with these changes? Abstain. During your 45 or 60 day loan period from application to closing, don’t do anything to change your credit status. Resist spending during this period and your second credit report should look like your first report.

In that regard, Fannie Mae will be shorting waiting periods for a new loan for individuals who have given the deed back to the bank (deed in lieu of foreclosure) because of financial problems or have done a short sale.  You may not have to wait the typical four or five years to qualify for financing to purchase another house. 

It is now likely the wait could be as little as two years.  A bulletin to lender’s from Fannie Mae said it was relaxing the rules for those individuals who participated in a deed in lieu of foreclosure or a short sale.  The new guidelines are to take effect July 1, 2010. 

Also, it was reported earlier that credit scores would suffer a deduction of 250 points for a foreclosure and a 150 point deduction for a short sale.  This is yet another reason to consider a short sale.

Visit the LA Times for more information.

The closely watch median sales of homes prices of in Southern California has jumped 14% in March from March one year ago.  The median price-the price at which one half the houses sell from more and one half the houses sell for less- rose 3.6% from February.

Encouraging signs, you bet.  As a Realtor, I can definitely feel the momentum of the housing market swinging upward. It is becoming clear that now is the time to make your decisions to buy real estate.  Prices and selection are still good in Palms Springs with the higher end starting to sell (homes over one million dollars).

  For complete details of county by county statistics see article in LA Times.

“The linchpin of the legislation is the tax credit of up to $10,000 for the first time home buyers and those purchasing newlly built homes.  It would take effect May 1, 2010. ” LA Times, March 23, 2010

“Lawmakers are setting aside $200 million to pay for it.  Buyers can receive 5% of a home purchase up to $10,000, as long as they reside there for two years.LA Times, March 23, 2010. TAX BREAKS+Up to $10,000 credit for first-time home buyers or those purchasing a newly built home.  LA Times, March 23, 2010.

For more detailed information I have posted the Average, Median, and Number of single family homes sold in Palm Springs by the month for the entire decade.   For instance, if you purchased your home in January of 2005, the median for that month would have been $565,000.  In December of 2009, the median price was $319,915.

 This information is a valuable tool whether you are a buyer or seller.  If you are thinking about buying or selling in Palm Springs please give me a call 760.831.5996.  I know the market currently and historically and would like to put my knowledge to work for you.

At the nation’s largest mortgage servicers, short sales soared 165% to 74,513 in the first nine months of 2009.  Realtors are beginning to see more accepted short sales and less aversion from lenders who are beginning to understand it is better to sell an occupied house than an empty house which is susceptible to neglect and vandalism.  Also, lenders are realizing it is generally less expensive to do a short sale over a full blown foreclosure.  This is good news for real estate professionals who in the past have experienced difficulty in closing short sales.  Maybe the time has come where the lenders are realizing the advantages of negotiating short sales.  Now, let’s hope the process of a short sale can be streamlined and transactions can be concluded in a timely manner which benefits everyone involved in a short sale as opposed to a foreclosure.

Click here to read the entire article featured on the front page of the LA Times February 18, 2010.

Palm Springs Real Estate fact obtained from the Desert Area MLS: The highest median price recorded for a single family residence in Palm Springs was in June, 2006 at $611,500.  At the end of the decade, December, 2009 the median price was $319,915.

The median price is the price for which half of the homes sold for more and half sold for less.

 

Starting today, February 1, 2100, the FHA flip rule has been deleted for the next year.  The long time rule prevented investors from immediately applying for an FHA loan. This change has been made with the intention of moving investor houses quicker.  For the complete article visit latimes.com